Barclays says that in light of the recent surprisingly rapid deterioration of fundamental support, and the potential for election pressure, it has changed its USD/BRL forecasts to BRL1.75 in 1 month (previously BRL1.70), BRL1.80 in 3 months (previously BRL1.70), 1.90 in 6 months (previously BRL1.75). It keeps its 12-month forecast unchanged at BRL1.75. The shop adds that December’s employment report reinforces the notion that growth is set to moderate in the coming months. Meanwhile, it says, the current account surprised in December with an almost $6.0bn deficit (versus the $3.6bn deficit expected by consensus), which should be repeated in January. Barclays thinks the current account deficit will rise to around $50bn-$70bn in 2010-11 versus $36bn or so in 2009.
Category: Daily Brief
Moody’s Positive on Coca-Cola Femsa
Moody’s has changed the outlook for Coca-Cola Femsa (KOF) to positive from stable, citing the Mexican company’s ample free cash flow generation, solid performance and debt reduction efforts over the past several quarters despite very challenging economic conditions. For 2010, Moody’s expects KOF to maintain free cashflow close to recent levels of around MXP5bn to MXP6bn (when normalized for working capital), which should allow for further de-leveraging. In 2008, Venezuela accounted for 18% of KOF’s revenues and 9% of its operating income. As of September 30, KOF reported gross debt of MXP15.7bn, down MXP2.9bn or 16% from year-end 2008. Net debt was MXP6.7bn, down by nearly half since year-end 2008. Moody’s adds that devaluation of the official Venezuelan exchange rate to 4.30 from 2.15 VEF/USD will not materially affect KOF’s credit metrics given Venezuela’s limited contribution to cash generation. Moody’s expects that KOF will continue to grow earnings and generate ample free cashflow in 2010 despite a still-challenged consumer, allowing it to further reduce debt and improve credit metrics.
Santander Registers Bond Sale
The Chilean unit of Spain’s Banco Santander has registered a 2014 UF3m ($127m) non-convertible bond issue with the local banking regulator. The AAA-rated bonds will pay 3.3%. Proceeds will be used to finance the bank’s mortgage loan portfolio, says a Santander spokesman. The Chilean bank itself is managing the sale, he adds.
MRS Approves Bond Issue
Shareholders in Brazil railroad company MRS Logistica have approved a BRL300m non-convertible debenture issue maturing in 2020. The bonds will pay 1.5% over the DI rate. Banco Bradesco will manage the issue. MRS runs the Southeastern Federal Railroad Network, which connects the states of Minas Gerais, Rio de Janeiro, and Sao Paulo. Its major shareholders are steel producer CSN and iron ore producer MBR.
Developer Gets Credit Line
Brazilian real estate developer Helbor Empreendimentos has signed a BRL1.5bn credit facility with Bradesco, it says. Helbor will use the loan to borrow to fund projects, according to an investor relations official. It will pay TR plus 10.5%-11.5%, depending on use of proceeds. The Sao Paulo-based developer of commercial and residential properties operates in 9 Brazilian states and held an IPO in 2007.
CorpGroup Grabs VTR Stake
A unit of Chile’s CorpGroup has acquired a 20% stake in telecom company VTR GlobalCom for CLP167bn ($333m) to be paid in cash in May, says Cristalchile, the seller. The sale will result in a profit of about CLP68bn, it adds. CorpGroup is a financial conglomerate controlled by Chilean businessman Alvaro Saieh. US-based Liberty Global, which controls 80% of VTR, last year offered to acquire the 20% stake for about $260m in cash or stocks. Local investment bank Celfin Capital had offered $323m. Both offers expired in November.
Minerva Talks Low 11s
Price expectations on a new $250m 2020 NC5 bond from beef producer Minerva is in the low 11% area, according to investors following the deal. The B3/B Brazilian meatpacker was heard surpassing $600m in orders Thursday, and could price as soon as today. Such a yield may prove attractive to investors seeing overall tightening yields in the Brazilian corporate space, says a European EM investor, if they can get comfortable with 5x-plus leverage. Proceeds from the sale are earmarked for refinancing 2010 and 2011 maturities. Goldman Sachs and Banco do Brasil are managing the transaction.
Brasil Soy Farmer Preps Bond
The Brazilian high-yield parade shows no sign of slowing, with yet another food producer joining the queue. Soy and Cotton grower Vanguarda do Brasil is preparing a debut $200m 2015 bond, according to the 3 main ratings agencies, which assign B1 and B minus grades. Morgan Stanley is managing the sale, an official at the company says, declining to offer further details. The proceeds will be used to repay working capital loans and other short-term debt, according to Moody’s. “The ratings on Vanguarda reflect the company’s aggressive financial profile, which arises from its weak liquidity and corporate governance issues, relative weak cash flow; and significant refinancing needs,” S&P says. It adds that risks are mitigated by an experienced management team, product differentiation and comparatively stable profitability. Based in the state of Mato Grosso, Vanguarda has been owned and operated by controlling shareholder Otaviano Pivetta for 27 years.
Banco Pine Preps Tier 2 Roadshow
Banco Pine is preparing to pitch a 7-year Tier 2 bond to Asian, US and European investors next week, expected to be for at least $150m in size. The mid-sized bank, rated Ba3 for the structure, could price the new bond as soon as the end of next week. HSBC, Credit Suisse and Banco Espirito Santo are leading the sale. It follows a Baa2 rated $750m 10-year Tier 2 from Banco Votorantim that priced to yield 7.375% last week. Pine’s last dollar bond was a 7.375% coupon $150m 2-year deal in June 2008.
Peru Readies Local Issue
Peru’s government is preparing to sell PES300m in 2042 bonds in the local market, according to an investor familiar with the finance ministry’s plans. Orders for the auction process are being submitted until January 26.